New Federal Trade Secret Protections on the Horizon?

Home to several of the world’s largest OEMs, and a major place of operations for others, Europe has a thriving automotive industry. As borders have become more and more open in the European Union, OEMs and their suppliers often have operations in several different countries. However, these businesses, as do those in other industries, then have to deal with a patchwork of law governing the protection of trade secrets in the EU, with some countries offering a well-developed common-law system of trade secret protection, other countries providing a pastiche of civil codes aimed at protecting various categories of information, and still others offering little established protection at all.

The Proposed Trade Secret Directive

In response to this fragmented system of trade secret protection, the Council of the European Union adopted draft legislation in May 2014 that would provide a uniform definition of trade secret information, as well as a unified set of remedies for misappropriation of trade secrets. The proposed framework would define protectable trade secrets as:

Information which meets all of the following requirements:

(a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;

(b) has commercial value because it is secret;

(c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

Unlawful acquisition and use of trade secrets is also defined in the draft directive, and includes broad language describing actionable conduct. For example, acquisition of a trade secret is deemed to be unlawful when, among other things, it is acquired by: “any . . . conduct which, under the circumstances, is considered contrary to honest commercial practices.”

The draft directive also requires member states to allow holders of trade secrets to seek preliminary and permanent injunctive relief against misappropriation (including specific forms of injunctions, such as recall of infringing products from the marketplace) and monetary damages, although much of the other relief that would be available in trade secret actions is left to the member states themselves.

Future of the Directive

The trade secret directive stands to unify the approach of EU nations to the protection of trade secrets, and the enforcement of trade secret law. With a predictable and consistent framework in place, it will likely be easier for trade secret owners to both protect their own valuable intellectual property, and to demand that suppliers and other third parties treat confidential information accordingly. In short, the directive as currently drafted promises to aid businesses seeking to protect their trade secrets and proprietary business information.

Passage of the trade secret directive in its current form is far from assured, however. The European Public Health Alliance, a coalition of a number of NGOs with a public health focus, has published a joint statement criticizing the directive as drafted, on the basis that it would permit “almost anything within a company to be deemed as such,” and could interfere with the public interest in the dissemination of information to and by journalists, whistleblowers, and consumers. In recent weeks, a proposed amendment to economic legislation in France that would have criminalized the misappropriation of trade secrets was withdrawn in the face of similar criticism about the breadth of information that would be protected.

For suppliers and manufacturers that have valuable proprietary information and that have operations or employees in the EU, these developments bear monitoring. The fate of the directive will affect whether and how those businesses update their trade secret protection measures for their EU operations.